For European shipowners faced with scrapping a tanker at the end of its working life, it's a no-brainer: sell it for €3 million to be broken up for scrap on a beach in Bangladesh, or recycle it in an environmentally friendly shipyard that complies with EU standards — and get nothing.

The vast majority of EU shipowners choose the former option, often changing the flag of registry on their aging ships for just a few thousand euros — but now Brussels plans to crack down on a practice that is polluting beaches in the developing world and putting lives at risk.

With efforts to come up with financial incentives to get shipowners to choose EU-approved yards currently becalmed, the European Commission has decided to update a worldwide list of shipyards that meet European social and environmental standards — by this fall — and oblige owners of commercial vessels flying an EU country flag to use EU-compliant facilities for recycling by 2019.

NGOs fear those rules will remain largely toothless, because EU shipowners can simply change the flag of registry of their vessels for as little as €2,400 before sending them off to be scrapped in foreign yards that don't meet EU standards. Although 40 percent of the world's fleet is controlled by EU entities, only around 20 percent fly a EU flag, a share that falls to 9 percent for end-of-life ships, according to a study by the European Commission.

“In theory, it should be very easy for European shipowners to pick a EU recognized yard, but the reality shows that the vast majority of EU-owned or EU-flagged end-of-life vessels end up for dangerous and dirty breaking on beaches of Bangladesh, India or Pakistan,” said Ingvild Jenssen, founder and director at NGO Shipbreaking Platform, a coalition of 19 organizations working to prevent pollution and unsafe working conditions caused by beaching — the practice of running old ships aground on third-world beaches.

Beaching is by far the most common shipbreaking method in South Asia, according to Shipbreaking Platform. It says 86 percent of the world's end-of-life tonnage was broken on beaches in 2016. The practice is very polluting and the working conditions are “appalling,” Jenssen said.

According to the NGO, at least 22 workers were killed in Bangladeshi yards in 2016 and 29 suffered severe injuries. Last year saw the worst catastrophe in the history of the industry, when 28 workers were killed and more than 50 injured when an explosion and a massive fire ripped through a tanker beached in Gadani, Pakistan.

In Bangladesh, unskilled workers — many of them under 18 — cut vessels apart for an estimated $3 for a 12- to 16-hour working day, according to a report by the European Economic and Social Committee. The life expectancy for men in the shipbreaking industry is 20 years lower than for Bangladeshi men in the general population.

An explosion at a shipyard in Gadani, Pakistan killed 28 in 2016 | Rehan Khan/EPA

Most of a ship's steel is coated with paint containing lead, mercury, zinc, arsenic and chromium, according to a study by the International Law and Policy Institute. The tides also wash out PCBs, asbestos and huge quantities of oil from beached ships.

Instead, EU rules mandate that approved facilities must have impermeable floors and dismantling must be done without the elements coming in contact with the sea or "any other permeable surface such as sand or gravel."

But tough environmental standards and well-paid workers mean that shipowners shy away from using EU-approved yards.

“We are handicapped by the high costs of labor, social charges and taxes,” said Antonio Barredo, managing director of DDR Vessels, a Spanish decontamination, dismantling and recycling company.

Asian yards also have an advantage over their European rivals because they are closer to local steel industries. “The reason why the yards in Asia are interested in recycling the ships is because they use the scrap," said Patrick Verhoeven, secretary-general of the European Community Shipowners’ Associations, an industry group. "There is a live steel scrap industry – which we do not have in Europe. It does not make economic sense to do it here.”

As a result, the French port of Bordeaux, one of 18 EU-approved facilities, currently dismantles one ship a year, which is usually a vessel owned by public entities.

“We have room for 10 ships a year," said Patrick Brocart, director for shipyards at the port of Bordeaux. "Today we are a very small player."

Money talks

Most European shipowners are taking a hard look at the bottom line when deciding what to do with their old vessels, and for now profit wins out over environmental worries.

In 2016, 328 vessels owned by EU entities or bearing EU flags were dismantled, of which 84 percent were beached in South Asia, Jenssen said.

According to the NGO, German shipowners were responsible for 97 ships rammed up on the beaches of South Asia out of a total of 99 vessels sold for demolition. Greece was responsible for 104 vessels sold to South Asian shipbreaking yards in 2016, the highest absolute number for an EU country.

One solution being mulled in Brussels is to give shipowners a financial incentive to use cleaner yards.

The idea would be to charge a fee to all ships calling at an EU port. The money collected over a ship's lifetime would be refunded if it was eventually scrapped at an EU-approved yard. The scheme was supported by NGOs and the European shipyard industry, but strongly opposed by shipowners, who complained it would disrupt efforts for a global solution brokered by the International Maritime Organization. Although the organization adopted the Hong Kong Convention on the safe disposal of ships in 2009, it still hasn't come into force because too few countries have ratified it. The association of international shipowners has only voluntary guidelines.

Verhoeven warned that even if the EU agrees on a financial incentive aimed at cancelling out the difference between dismantling in South Asia and using EU-approved yards, it would be ineffective because European yards have a capacity shortage – an argument yards here reject.

“We do have capacity in Europe, but it is not adequate to dismantle the big bunker vessels or container vessels," he said. "And I do not think we will ever have it, unless a government or the EU decides to put money in creating these facilities.”

In the end, the Commission balked at introducing the fee, calling for “further analysis” of the measure's compatibility with EU and international law.

Instead, the Commission is hoping moral persuasion does the trick — saying its updated list of shipyards, for which it has received 22 applications from outside the bloc, will still have a global impact. “Applications to the list have come from facilities in different regions of the world, including South Asia,” said a Commission spokesperson. “This suggests that the list will be a reference for the whole sector, irrelevant of flag.”